Nvidia reports blockbuster earnings, rejecting concerns about AI bubble : NPR
Tech giant Nvidia reported blockbuster earnings Wednesday, fueling both applause and fears about Wall Street’s explosion of investment in AI.
LEILA FADEL, HOST:
Technology company Nvidia continues to produce stunning results.
TO MARTÍNEZ, HOST:
Yeah. Listen to these numbers. The company announced last night that it had earned $32 billion over the past three months. In recent weeks, its valuation has reached $5 trillion. Nvidia is a company fueling much of Wall Street’s optimism about AI.
FADEL: NPR financial correspondent Maria Aspan is here to talk about investor exuberance and caution in the face of the AI boom. Hello, Maria.
MARIA ASPAN, BYLINE: Hello.
FADEL: Nvidia is valued at $5 trillion. It’s a lot. How and why does it arouse so much enthusiasm?
ASPAN: It’s actually the most valuable company in the world, and it’s also one of the most closely watched. As an example, Bloomberg, the financial news site, actually published Nvidia’s entire conference call with investors live yesterday, as if it were the Oscars or the Super Bowl. And Nvidia is closely watched because it sells the computer chips that are fueling the AI boom. And as he told investors again yesterday, he makes a ton of money from it. Yesterday’s earnings report showed that revenue and earnings beat analysts’ expectations, and the market is delighted. Nvidia shares are currently up about 5% and stock futures are higher overall. Yesterday, Nvidia CEO Jensen Huang told investors on a call that he was confident in Nvidia’s future.
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JENSEN HUANG: There’s been a lot of talk about an AI bubble. From our perspective, we see something very different.
ASPAN: So he’s basically saying that the world is only at the beginning of the transition to generative AI and there’s much more to come.
FADEL: Nvidia’s CEO has dismissed the idea of an AI bubble, but there appears to be very real fear among investors. Is this true?
ASPAN: Yeah. It’s a recurring fear, and we’ve seen it resurface in recent days. The benchmark S&P 500, in particular, is coming off its worst losing streak since August. And that’s because technology, and AI in particular, is a very large part of the stock market. By one estimate, AI-related stocks account for nearly half the value of the S&P 500. But even if Wall Street is pinning all its hopes on the AI boom, it’s a long-term bet, and companies investing in AI simply aren’t seeing huge, tangible results yet.
So, this latest Nvidia earnings report came out at a time when we’re seeing more and more warnings that tech stocks are too hot and the market is due for a correction. That’s what we’re hearing from big investment banks like Goldman Sachs and Morgan Stanley, and even Silicon Valley executives involved in the AI boom, like Sundar Pichai. He’s the CEO of Google’s parent company, Alphabet, which, it should be noted, is a financial backer of NPR. And this week, in an interview with the BBC, Pichai was surprisingly candid about whether it was a bubble.
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SUNDAR PICHAI: I think it’s both rational and there are elements of irrationality in a moment like this.
ASPAN: The elements of irrationality are a pretty important acknowledgment from Google. And Pichai also acknowledged that sometimes the tech industry overshoots the limits of investment cycles.
FADEL: Very good, Maria. So what does this mean for all of us tech non-titans?
ASPAN: Well, it’s important to remember that the stock market is not the economy, but it is often considered an indicator of how the economy is doing. And the problem is that much of the AI boom that’s driving the market to record highs is allowing investors to gloss over questions about what’s happening in the economy. Tariffs reduce corporate profits, consumer prices rise, and the labor market weakens. So while AI is a big positive, it’s unclear how long it can last.
FADEL: That was Maria Aspan from NPR. Thank you, Mary.
ASPAN: Thank you.
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